When, One Mans Debt is another Mans... Debt

  • This 2008 crisis was rooted in too much debt. Even without the headwinds caused by structurally rising energy prices, the credit bubble was destined to someday pop all on its own. After all, there's no way for debt to continually expand faster than income, which is what was happening across the entire OECD, thanks to the ultra-accommodative policies of the world's central banks.

    (Source

    Note that GDP is virtually unchanged since 2008, meaning that $5 trillion did not buy us any incremental GDP; it only managed to bring us back to about even: But I doubt your retirement accounts are close to even.

    (Source

    That means we have about the same-sized economy to support an additional $5 trillion in federal debt, or roughly a third more than when the crisis started.

    It is also true that GDP growth in the US is weaker this year than last year, a trend that does not bode well for the US deficit situation:

    (Source

    It should be noted here that this weak growth is happening even though the US federal deficit for FY 2011 was $1.3 trillion, or more than 10% of GDP. If that's how anemic the economy is with that level of deficit spending, where would it be with less and what will happen when the money stops?

     

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